Brokers As Fiduciaries

Donald C. Langevoort


The first formal legislative package sent to Congress by the Obama Administration dealing specifically with securities law reform was not about the financial crisis issues of derivatives, securitization, or credit ratings—though these came shortly thereafter. Instead, it was about consumer protection. Having proposed a bold new Consumer Financial Product Commission but chosen to leave investment product regulation in the jurisdiction of the SEC rather than shift it to the new agency, the Administration sought to enhance the consumer protection powers of the SEC so that they would be comparable with what the proposed new agency could do with respect to non-securities financial products. Substantively, the headline reform proposal was the authorization for the SEC to promulgate rules to conform the duties owed by broker-dealers to their customers with the duties owed by investment advisers to their clients, holding both to the same fiduciary standards of conduct.

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